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Weekly Digest: Announcement of more USDA purchases boosts milk futures prices

Progressive Dairy Editor Dave Natzke Published on 06 May 2020
Risser photo

Digest Highlights

USDA adding $120 million to ‘Section 32’ dairy purchases

U.S. Secretary of Agriculture Sonny Perdue announced plans, May 4, to purchase an additional $470 million worth of food – including another $120 million of dairy products – for distribution to communities nationwide. The “Section 32” food purchases will begin in June for July delivery and are in addition to purchases previously announced.

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Dairy makes up the largest component of the list of agricultural products covered by the announcement, which includes a wide variety of fruits, vegetables, meat, dairy and seafood products.

“These Section 32 purchases will help both Americans who need high-quality nutritious food as well as U.S. dairy farmers who are experiencing unprecedented losses from the COVID-19 national emergency,” said Jim Mulhern, president and CEO of the National Milk Producers Federation (NMPF). “The purchases will provide important and needed support to the dairy supply chain.”

Along with bid solicitations, details on how vendors may participate are available on the USDA Ag Marketing Service website.

The program’s name stems from its authorization in Section 32 of federal law approved in 1935, created to support U.S. agriculture through the purchase of surplus commodities while providing food to the needy.

The latest announcement brings total announced USDA food purchases for the remainder of fiscal year 2020 to about $4.89 billion. It includes about $3 billion for the Farmers to Families Food Box Program, authorized under the Families First Coronavirus Response Act (FFCRA), $850 million under the Emergency Food Assistance Program (TEFAP) and $573.6 million through the Food Purchase and Distribution Program (FPDP).

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Class III and IV futures prices improve

The announcement of additional dairy product purchases has provided some support to milk futures prices, at least in the short term.

Comparing Chicago Mercantile Exchange (CME) Class III milk futures prices at the close of trading on May 5 to May 1, the June price was up $1.44 per hundredweight (cwt). July and August contracts were up $1.17 and $1.12, respectively. May-July and May-October Class III price averages were up about $1 per cwt in two days of trading.

Comparing changes in Class IV milk futures prices over the same period, the May-July and May-October averages were up about 50 cents per cwt.

Despite the improvement, latest Dairy Margin Coverage (DMC) forecasts indicate substantial indemnity payments ahead. Based on milk and feed futures prices at the close of trading on May 5, the DMC Decision Tool estimates margins are likely to drop to be about $7 per cwt in April and July, under $5 per cwt in May and under $6 per cwt in June, ensuring substantial DMC payments at several insured levels.

Read also: Weekly Digest II: Quarterly dairy replacement cow prices slide a little.

Global Dairy Trade index lower

The index of Global Dairy Trade (GDT) dairy product prices fell just 0.8% in the latest auction held May 5, with milk powder prices showing a small improvement. A price summary of individual product categories follows:

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  • Skim milk powder was up 0.1% to $2,373 per metric ton (MT).
  • Butter was down 5.8% to $3,867 per MT.
  • Whole milk powder was up 0.1% to $2,745 per MT.
  • Cheddar cheese was down 6.8% to $4,115 per MT.

The next GDT auction is May 19.

Pennsylvania dairy campaign urges consumers to buy local

The Pennsylvania Dairymen’s Association launched a new promotion campaign to encourage families to support their local dairy farm families through the COVID-19 pandemic.

The campaign, “We are your dairy farmers: Stronger together, buy local, choose PA dairy,” kicked off with a public service announcement posted on YouTube. It features the Copenhaver family of Talview Dairy in Lebanon County and the Risser family of Meadow Vista Dairy in Bainbridge, Lancaster County, Pennsylvania.

“During tough times, we are all in this together and will get through this together, but it takes a team. People ask what they can do to support us right now, given that the supply chain has drastically shifted away from restaurants, schools, colleges and businesses,” said Dave Smith, executive director, Pennsylvania Dairymen’s Association. “Our goal is to educate everyone about the importance of our farmers to their local communities and economies, and when we buy local and choose PA dairy or PA Preferred products, we are getting 100 percent guaranteed Pennsylvania-produced milk.”

USDA offers new, 30-year regional CRP pilot program

The USDA’s Farm Service Agency (FSA) will open sign-up this summer for CLEAR30, a new pilot program that offers farmers and landowners an opportunity to enroll in a 30-year Conservation Reserve Program (CRP) contract. The program sign-up period is July 6 to Aug. 21.

This pilot is available to farmers and landowners with expiring water-quality practice CRP contracts in the Great Lakes and Chesapeake Bay regions, including Delaware, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, Ohio, Pennsylvania, Virginia, West Virginia and Wisconsin. Eligible producers must have expiring Clean Lakes, Estuaries and Rivers (CLEAR) initiative contracts, including continuous CRP cropland contracts with water-quality practices or marginal pasturelands CRP contracts devoted to riparian buffers, wildlife habitat buffers or wetland buffers.

Annual rental payment for landowners who enroll in CLEAR30 will be equal to the current continuous CRP annual payment rate plus an inflationary adjustment of 27.5%. Another unique program feature is that FSA will help producers maintain CLEAR30 contract acreage.

Due to current COVID-19 restrictions, interested producers should contact their local USDA service centers by phone.

Progressive Dairy COVID-19 resources

Progressive Dairy frequently provides updates on COVID-19 news and resources on a special webpage.

  • Updates for May 4 cover the opening of a special period for farmers and agricultural businesses to apply for U.S. Small Business Administration Economic Injury Disaster Loans (EIDL) and an update on strong retail dairy product sales.

  • Updates for May 6 cover a temporary Department of Homeland Security policy allowing expired state driver’s licenses and identification cards for use as “List B” documents used to complete Form I-9, Employment Eligibility Verification. Darigold’s Leroy Plagerman discusses upcoming dairy price struggles in a NMPF podcast.

There’s also information on event changes and cancellations; a list of recent dairy organization podcasts related to COVID-19; a comprehensive list of other state, regional and national resources; and helpful articles previously appearing on the Progressive Dairy website.  end mark

PHOTO: The Risser Family owns Meadow Vista Dairy in Bainbridge, Lancaster County, Pennsylvania, and is featured in the new "Choose PA Dairy" campaign. Pictured left to right are: Kiley, Melissa, Adalyn, Gideon and Justin Risser. Photo courtesy of Pennsylvania Dairymen’s Association.

Dave Natzke
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